सुप्रीम कोर्ट ने 16% दवा मार्जिन सीमा सुझाई, स्रोत एवं प्रभाव पर सवाल

SC suggests a 16% markup cap on medicines: How was the figure arrived at?

The Supreme Court has asked the Centre to explain why a 16% retailer margin used for controlled medicines cannot be applied more widely. The question has widened the debate over price gaps between procurement, trade and what patients finally pay.

India’s drug-pricing system does not impose one uniform margin across all medicines. Instead, it operates through a mix of price controls for essential medicines and looser regulation for the much larger pool of non-scheduled drugs.

It is against this backdrop that the Supreme Court’s suggestion of applying a 16% retailer margin more widely has opened a fresh debate on how much room should exist between the price at which a medicine reaches the trade and the MRP paid by a patient.

The Court, while hearing a public interest litigation filed by transparency activist advocate Kishan Chand Jain and paediatrician Dr Sanjay Kulshrestha in 2023, last week asked the Centre to examine why the 16% retailer margin already used in the pricing formula for controlled medicines could not be applied more broadly.

The Centre has been asked to respond, with the matter listed next for October 12.

The issue came up after the court was shown an example of a cancer medicine that was reportedly available to a retailer for around Rs 2,700 but carried an MRP of Rs 27,000, almost a ten-fold difference. Calling it 'dacoity in broad daylight', the court questioned how such a gap could arise and who ultimately benefited from it.

The question is being probed by the Court even as about 48% of healthcare expenditure in India remains out-of-pocket, with drug pricing often found in multiple studies as the leading component of the same.

But where did the 16% figure, suggested by the apex court, come from? And does it mean drug companies are allowed to make only 16% profit?

WHY 16 % ALREADY EXISTS

The 16% figure is embedded in the Drugs (Prices Control) Order, 2013, or DPCO, which provides the framework for regulating prices of medicines.

Broadly, for the prupose of price control in India, medicines fall into two categories – scheduled and non-scheduled formulations. Scheduled medicines are those covered under the price-control framework and largely correspond to medicines listed in the National List of Essential Medicines (NLEM).

The NLEM notified in 2022 contains 388 medicines and about 1000 formulations and the National Pharmaceutical Pricing Authority (NPPA) fixes their ceiling prices.

For these medicines, manufacturers cannot simply decide any MRP they want. The NPPA uses a market-based pricing formula. It looks at the price to retailers of qualifying brands and generic versions with at least 1% market share, calculates their average price and then adds a 16% retailer margin to arrive at the ceiling price. Applicable taxes are added subsequently.

The ceiling prices are also revised annually in accordance with the Wholesale Price Index (WPI), subject to the DPCO.

The 16% therefore represents a component of the regulated pricing formula, but it does not necessarily mean that a manufacturer buys or produces a drug for Rs 100, sells it for Rs 116 and pockets the difference as profit.

Manufacturing costs, marketing, distribution, logistics and other expenses are accounted for elsewhere in the supply chain.

The SC's question is whether the same basic principle – keeping the trade-to-MRP gap within a defined margin – could be extended to medicines that currently fall outside direct price control.

Dr Gopal Dabade, a doctor based in Karnataka who is associated with the patient-rights group All India Drug Action Network (AIDAN), said the principle of keeping margins reasonable was justified.

“Pharmaceutical companies and others in the supply chain can be allowed reasonable profits, not huge,” he said. AIDAN has been involved in litigation seeking rationalisation of medicine prices since 2003, making the present proceedings part of a much longer dispute over affordability and regulation.

The complication is that most medicines are not directly subject to ceiling prices.

Non-scheduled medicines can be priced by manufacturers without prior approval from the NPPA. However, their prices cannot ordinarily be increased by more than 10% in a year. The NPPA can intervene in specified circumstances.

This leaves a large part of the market – about 82 % of the medicines sold – outside the kind of direct price calculation used for scheduled medicines. It also means there is no universal rule that says the MRP of every medicine must bear only a specified percentage over its price to retailers.

That is the gap at the heart of the SC’s intervention.

WHO GETS THE PRICE GAP?

Pharma analyst Salil Kallianpur underlined that the supply chain can involve manufacturers, carrying and forwarding agents, distributors, stockists and retailers, with costs related to transportation, storage, credit, inventory, expiry and, for some products, specialised handling.

He stressed that the debate therefore needs to examine the entire pricing chain rather than assuming that the PTR-MRP difference represents one company’s earnings.

“The real issue is the architecture of the medicine pricing chain,” he said.

“The more consequential debate, therefore, is about who captures the economic surplus between the factory gate and the patient,” Kallianpur added.

This becomes particularly relevant in hospital settings, where patients may have limited ability to compare prices or choose another pharmacy while undergoing treatment. The SC has also raised questions about practices where patients may effectively have little choice over where medicines are purchased.

The Association of Healthcare Providers of India (AHPI), the largest network of private hospitals in the country, argued that medicine pricing in hospitals needs to be considered alongside the wider cost of delivering care.

Girdhar Gyani, Director General, AHPI, said hospitals do more than dispense medicines. They have to stock, store, prepare, check and safely administer drugs, while maintaining round-the-clock clinical services and monitoring patients.

“Medicines and consumables are an important part of this continuum, but their price cannot be viewed in isolation from the overall cost and responsibility of delivering safe and effective patient care,” he said.

AHPI pointed out that medicines and consumables are only one component of hospital expenditure. Hospitals also incur costs on specialised clinical workforce, nursing, diagnostics, medical equipment and depreciation, infrastructure, utilities, infection control, clinical support services and continuous patient monitoring.

While supporting greater transparency and affordability, the hospitals’ body has cautioned against treating 16% as a one-size-fits-all margin. A fast-moving chronic medicine, a low-volume lifesaving drug, a cold-chain product and an expensive speciality medicine can have very different procurement and handling costs.

On oncology medicines, it said biologics, targeted therapies, immunotherapies, oral cancer drugs and supportive medicines have different storage, wastage, cold-chain and handling requirements. A uniform margin, it argued, would therefore need to be assessed against the economics of keeping products available.

The organisation has called for an activity-based, scientific assessment covering regulatory requirements, supply-chain costs, clinical responsibilities and investments required for quality and patient safety.

THE CONSUMABLE QUESTION

The debate over margins is also no longer confined to medicines.

In September, Maharashtra Food and Drug Administration Commissioner Tukaram Mundhe flagged large gaps between procurement prices and printed MRPs of hospital consumables following a survey across hospitals in the state.

The findings included an IV infusion set bought for Rs 11.05 with an MRP of Rs 325, translating into a 2,841% markup. A syringe procured for Rs 6.75 had an MRP of Rs 57.20, while a catheter bought for Rs 29.41 carried an MRP of Rs 310.

Mundhe said patients admitted for treatment generally have no way of knowing the procurement price of such products or assessing whether the MRP reflects their actual cost.

He described the information gap as a public-health issue and sought a review of pricing rules from the Department of Pharmaceuticals and the NPPA.

The Centre subsequently sought a report from the NPPA on the price discrepancies flagged in the Maharashtra survey, bringing medical consumables into the wider discussion on trade margins and healthcare costs.

There is also a policy precedent for examining trade margins separately from manufacturers’ prices. The Parliamentary Standing Committee on Chemicals and Fertilizers, in its August 2026 review of the NPPA, flagged the absence of a permanent Trade Margin Rationalisation (TMR) framework.

Pilots had earlier been undertaken for 42 anti-cancer medicines and COVID-19 devices, but a permanent framework had not been incorporated into the DPCO.

The SC’s 16% suggestion therefore triggers a larger policy question: whether India should continue regulating medicine prices mainly through selected essential medicines, or develop a broader system for examining the margins accumulated between manufacturers, distributors, retailers, hospitals and patients.

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